Macquarie Group eyes new opportunities with capital raise as interim profit doubles to $2 billion

Macquarie Group eyes new opportunities with capital raise as interim profit doubles to $2 billion

Macquarie Group (ASX: MQG) has more than doubled its first-half profit to $2.04 billion and announced a $1.5 billion capital raising to seize on emerging opportunities across its portfolio.

The net profit for the six months to the end of September is 107 per cent up on the same time last year and maintains the momentum of an earnings rebound in the previous half.

The latest result is slightly better than the March half-year, but Macquarie is not making any forecasts for the full year, arguing that international markets and geopolitical volatility remains, while the broader recovery is still dependent on the ongoing uncertainty of COVID-19.

“This first half saw a significant increase in net profit contribution from all four operating groups compared with 1H21, a period which was affected by the COVID-19 pandemic,” says CEO Shemara Wikramanayake.

“Today’s result is consistent with a strong 2H21 and reflects improved trading conditions across our diverse platform.”

Macquarie lifted earnings from asset management by 23 per cent, from banking and financial services by 52 per cent and from commodities and global markets by 60 per cent. Macquarie Capital rebounded from a loss in the previous corresponding period to make a profit contribution of $468 million.

The banking division $482 million profit was buoyed by a strong home loan segment, business lending, deposits growth and lower credit impairment charges.

Macquarie lifted assets under management by 31 per cent to $737 billion, largely due to the acquisition of Waddell & Reed financial planning network, improved markets and favourable foreign exchange impacts. International income accounted for 72 per cent of Macquarie’s total income.

The group has affirmed that its financial position ‘comfortably exceeds regulatory minimum requirements’. Macquarie has a capital surplus of $8.4 billion.

Macquarie’s plans to raise $1.5 billion via a non-underwritten institutional placement is to be priced from $190 a share, although the final price will be determined by a bookbuild process. This has been accompanied by a share purchase plan for investors.

“Macquarie has experienced a period of sustained and material growth in capital requirements across our annuity-style and markets-facing activities,” says Wikramanayake.

“Having deployed $5.5 billion of capital over 2H21 and 1H22, we continue to see a strong pipeline of opportunities. Raising new capital provides us with additional flexibility to invest in new opportunities where the expected risk-adjusted returns are attractive to our shareholders, while maintaining an appropriate capital surplus.”

In a sign of the rising importance of sustainable investments, Macquarie’s UK-born Green Investment Group (GIG) will operate as part of the Macquarie Asset Management (MAM) division from 1 April next year, a move that the group says will provide clients more access to green investment opportunities.

“The need for investment has grown substantially in GIG’s areas of focus, and this move will enable long-term investment across the asset lifecycle, from development to operations,” says Macquarie.

“GIG will retain its brand within MAM Private Markets, and continue its mission to accelerate the green transition, providing greater scale of decarbonisation solutions for clients, portfolio companies, communities, and the environment.”

Macquarie has offered a cautious outlook for the full year and has not offered guidance for investors.

“We continue to maintain a cautious stance, with a conservative approach to capital, funding and liquidity that positions us well to respond to the current environment,” says the company.

Wikramanayake says the group is ‘well-positioned to deliver superior performance in the medium term’.

Macquarie Group is paying an interim dividend of $2.72 per share, 40 per cent franked, which is more than double the payout from a year earlier.

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